A Guide to Home Equity Lines of Credit
It seems as though you can't turn on the television or read the
newspaper without seeing some advertisement for lenders offering
home equity loans or lines of credit. Perhaps you aren't really
in the market for a loan, but after seeing all of the
commercials and ads have begun to wonder about getting a line of
credit. Maybe you want to do some home improvements, or are
looking for a way to pay for some of the extra expenses that
come up in your life.
It's important that you understand exactly what home equity
lines of credit are and exactly how they work before you begin
looking for one, however... after all, you don't want to get in
over your head without even knowing how you got there.
Defining Home Equity Lines of Credit The first thing that you
need to know when working with home equity lines of credit is
exactly what they are. As the name implies, a home equity line
of credit is an amount of credit granted by a bank or other
financial institution that uses the equity that you have built
up in your home or other real estate as security to guarantee
that anything charged to the line of credit will be repaid. This
line of credit acts just like any other credit card or credit
line, with the only major exception being the nature of the
security used for the credit line.
Common Uses of Home Equity Lines of Credit
Since home equity is usually quite high in value, the amount of
credit that can be established in a credit line based upon it
also tends to be quite high. This can open individuals up to
credit limits that they have never had before, which they can
use for a variety of different purposes. Many individuals who
take out credit lines based upon the equity in their house or
other real estate use the new credit for larger projects, such
as home improvements or debt repayment.
These lines of credit might also be used to pay for college or
other educational expenses for individuals or their children, or
may simply be used as the means for financing the vacation that
a person has always wanted to take but has never really had the
money.
Obviously, the choice is up to the homeowner... but it's
important to keep in mind that whatever is borrowed against a
home equity line of credit will have to be repaid with interest.
Applying for a Home Equity Line of Credit
A home equity line of credit can be applied for at any bank or a
variety of non-traditional or specialty lenders who deal with
home equity. Even most online lenders are able to grant this
type of credit line. Treat the credit line application as though
it were a mortgage or equity loan, and take the time to shop
around for the best interest rate and credit terms.
Compare the various quotes that you receive from various banks
and lenders, making sure that you carefully consider the
benefits and drawbacks of the various credit terms that you are
offered.
When you submit your final application to the bank or lender of
your choice, it should be because you have decided that it is
the best overall deal among all of the offers that you received
instead of simply being the offer that had the lowest interest
rate.
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